Business Studies Paper 1 Questions and Answers - Mincks Group of Schools Mock Examinations 2022

Instructions to Candidates:

Write your Name, School and Admission number in the spaces provided
Answer all the questions in the spaces provided
Check that the question paper has all pages printed and that no questions are missing

FOR EXAMINERS USE ONLY

QUESTIONS	1	2	3	4	5	6	7	8	9	10	11	12	13	14	15
MARKS

QUESTIONS	16	17	18	19	20	21	22	23	24	25
MARKS

QUESTIONS

State four ways in which the utility of a product can be increased (4mks)
Highlight four disadvantages of operating an enclosed office layout (4mks)
State four reasons why Countries may decide to trade with each other (4mks)
State four functions of the Central Bank of Kenya (4mks)
Odhiambo provided the following information for the month of January 2019
Sh
Opening stock 200,000
Closing stock 300,000
Purchases 500,000
Margin 20%
Prepare his trading account for the month ending 31st January 2019
State four indicators of economic development (4mks)
State four consequences that may arise due to poor arrangement of goods in a warehouse (4mks)
The inflation rate in Country X moved from 58% to 94% State four positive outcomes of this change (4mks)
Highlight four circumstances under which a manufacturer would find it necessary to carry out market research (4mks)
State four factors that determine the amount of revenue collected by the Kenyan Government through taxation (4mks)
The following balances were extracted from the books of Shiku Traders for the year ended 30th June 2010
Debtors 120,000 Cash at bank 180,000
Creditors 60,000 5 years bank loan 270,000
Machinery 450,000 Stock 60,000
Cash in hand 70,000
Prepare a balance sheet of Shiku traders as at 30th June 2010
Highlight four guidelines that may heir an entrepreneur in identifying a viable business opportunity (4mks)
On January 1st 2006, Mwaniki Traders had sh 180,000 cash and sh 170,000 at bank During the month the following transactions took place:
2006 Jan 10: paid ABM Trades sh25,000 by cheque sh 1000 cash discount
2006 Jan 16: Sold goods for sh14,000 cash cash less 5% discount
Enter the above transaction in a cash book and balance it off (4mks)

Identify the error committed in the following cases (4mks)

(i) A transaction took place but was not recorded.
(ii) Entries are made on the wrong sides of the relevant account.
(iii) Entries are made correctly but in the wrong class of accounts
(iv) Errors in both credit and debit entries are of equal magnitude and cancels out each other.

Outline four factors that determine the amount of money that an individual may hold inorder to meet unexpected expenses (4mks)
State four factors which determine the size of a Country’s national income (4mks)
Outline four ways in which the nature of a product influences the choice of a distribution channel (4mks)

In the spaces provided in the table below, name the document Jambi LTD would issue under the circumstances described (4mks)

Circumstances	Source document
(i) Jambi LTD sold goods worth Ksh.54,000 on credit to Jamilar Traders
(ii) Osuri Enterprises which had bought goods worth Shs.27,000 was erroneously charged for only Sh.25,000.
(iii) Guru Traders paid shs.33,900 by cheque to Jamii LTD for goods which had been supplied.
(iv) Goods sold to Jamilar Traders had been overprices by Shs.4,000.

State four reasons why the Kenyan government has been organizing seminars and workshops for training youths in business (4mks)
State four ways in which the legal political environment may improve business performance (4mks)
Give four differences between a Public limited company and a partnership

Public Limited Company

Partnerships

(i)

(ii)

(iii)

(iv)
The graph below represents the demand and supply curve for milk

State four effects of shift of the demand curve to the right (4mks)
State four reasons why bill boards are popular in product promotions (4mks)
Highlight four measures that a government may take to correct a balance of payment deficit in the Country (4mks)
Mention four benefits that may enjoyed by a Country that is experiencing over- population (4mks)

MARKING SCHEME

Ways in which the utility of a product can be increased.
- By changing its location/transporting to different places
- By changing its ownership/through exchange/selling/trade.
- By changing its form/manufacturing/processing/construction.
- Through warehousing/storage.
  An 4 x 1 = 4mks
Disadvantages of operating an enclosed office layout.
- It is costly to construct/maintain
- There is no close supervision of workers
- Encourages absenteeism.
- Encourages laxity in an office.
- A lot of time is taken by workers moving from one office to another.
- Possible misuse of office facilities/equipments
- Does not economize on floor space.
- Not flexible in terms of redesigning/resign
- Slowed work flow.
- May lead to breakdown of communication among members of staff
  Any 4 x 1 = 4mks
Reasons why Countries may decide to trade with each other.
- Exchange their surplus
- To acquire quality goods.
- To acquire variety of goods
- To enhance factor mobility
- To enhance international relation
- To exchange skills and knowledge of producing certain goods and services.
- Acquire goods they are unable to produce.
- To acquire foreign exchange.
- To create employment.
- When it is cheaper to import
- To exploit resources optimally
  Any 4 x 1 = 4mks
Functions of the Central Bank of Kenya.
- Issue of currency
- Banker to commercial banks
- Banker to the government
- Maintains an account for foreign exchange services
- Managing public debt.
- Adviser to the government
- Control of commercial banks
- Lender of last resort.
- Acts as a link to other Central banks
- Credit control.
  Any 4 x 1 = 4mks

Trading account for the month ending 31st January 2019
Margin = ⅕ mark up ¼
C.O.S = 200,000 + 500,000 - 300,000 = 400,000
Mark-up = GP GP = ¼ x 400,000 = 100,000
Cost of sales
Odhiambo
Trading a/c
For the month ending 31/01/2019

Opening stock 200,000√

Add: Purchases 500,000√

COGAFS 700,000√

less: Closing stock 300,000√

C.O.S 400,000√

GP. c/d 100,000√

500,000

Sales 500,000√

500,000

G.P b/d 100,000√

8 x ½ = 4mks

Indicators of Economic development.
- Improvement in health facilities
- Low rate of unemployment
- Increase in skilled manpower.
- Use of modern technology in production
- Improved life expectancy
- Reduced infant/mortality rate
- More equitable distribution of income.
- Reduction of illiteracy.
- Shift from Agriculture to manufacturing sector
- Improvement of entrepreneurial ability.
- Increase and improvement of institutions that handles new method of production.
  Any 4 x 1 = 4mks
Consequences that may arise due to poor arrangement of goods in a warehouse.
- Damage/breakage of goods.
- Pilferage/theft of good.
- Wastage of time when searching for the required goods.
- Uneconomical/wastage of space in the warehouse
- Possible loss of government revenue in bonded warehouse
- Increased overhead costs.
  Any 4 x 1 = 4mks
Positive effects of inflation
- Increased production in order to maintain living standard.
- Better utilization of available resources.
- Motivates people to work harder.
- Debtors may pay less in real terms.
- Sellers may earn more.
  Any 4 x 1 = 4mks
Circumstances when manufacturers would market research.
- Where he wants to determine the competition level and how to face it.
- Where there is need to establish the best price that will suit the consumer.
- Where he intends to find the best method of distributing goods.
- Where the product is new.
- Where he wants to establish the best packaging of goods.
- Where he intends to establish the best method of producer promotion.
  Any 4 x 1 = 4mks
Factors determining the amount of revenue collected by the Kenyan Government through taxation.
- Distribution of incomes/gap between rich and poor
- Social and political factors.
- Honesty and efficiency of the tax authorities.
- Citizens level of real income.
- Economic structure of the Country/vector/tax base.
  Any 4 x 1 = 4mks

Shiku Traders
Balance sheet
As at 30th June 2010

Machinery 450,000√

Stock 60,000√

Debtor 120,000√

Bank 180,000√

Cash 70,000√

880,000

Capital 550,000√

5 years loan 290,000√

Creditor 60,000√

880,000

8 x ½ mks

Factors to consider when evaluating business ideal opportunity
- Availability and size of market
- Profitability of the investment
- Legal requirements
- Possibility of growth of the business
- Ability to cope with competition.
- Ability to adopt technology
- Adequacy of resources necessary for operating the business
  • Any 4 x 1 = 4mks

Mwaniki Traders cash book

Date

Details

Disc All.

Cash

Bank

Date

Details

Disc. Rec.

cash

bank

1/1/06

16/1/06

Balance b/d

Sales

Bal b/d

700√

700

180,000√

13300√

193,300

193,300

170,000

√

170,000

145,000

10/1/06

16/1/06

ABM traders

Bal. b/d

1000

√

1000

√

193,300

193,300

25,000√

√

145,000

170,000

8 x ½ = 4mks

Errors
- Error of omission
- Error of complete reversal of entries.
- Error of principle
- Compensation errors.
  4 x 1 = 4mks
Factors that determine the amount of money held.
- Level of income
- Family status
- Age of an individual
- Number of dependant
- Individuals temperament/attitude towards life.
- Duration between incomes
  Any 4 x 1 = 4mks
Factors determining size of country’s national income
- Labour supply
- Capital/man-made resources
- Entrepreneurship
- Lan/natural resources.
- Level of technology
- Political stability/type of governance
- Attitude of citizens towards work.
- Foreign investment.
- Size of the subsistence sector
  Any 4 x 1 = 4mks
Ways in which the nature of a product influences the choice of a distribution channel.
- Perishable goods require the shortest channel
- Bulky goods require shorter channels
- Highly valuable goods require short channels
- Technical goods require short channel than light goods.
  Any 4 x 1 = 4mks
Documents issued
- Invoice /invoice issued/outgoing invoice
- Debit note/debit note issued
- Receipt/receipt issued
- Credit note/credit note issued.
  Any 4 x 1 = 4mks
Why the Kenyan government has been organizing seminars and workshops for training youths in business.
- Expose them to modern development in business
- Educating them on efficient methods of operating business
- To imprt proper business ethics.
- Inform them on profitable business opportunities available
- Educate them on government policies on business activities
- Expose them to problems facing them and the possible solutions.
  Any 4 x 1 = 4mks
Ways in which the legal political environment may improve business performance.
- Improved infrastructural network may attract more businesses
- Political stability may make it attractive
- Increased subsidies lower costs of production
- Reduced taxes may attract more businesses
- Abolishing price controls enable businesses to get better profit margins.
- Favourable legislation reduces bureaucratic procedures
  Any 4 x 1 = 4mks

Differences between a Public limited company and a partnership.

Public Limited Company	Partnerships
(i)minimum of 7 shareholder and no maximum number of shareholders	(i) Performed between 2 – 20 Partners except for special partnership
(ii)shareholders have limited liability	(ii)partners have unlimited liabilities except for limited partners
(iii)has perpetual life	(iii)limited life
(iv)invite public to subscribe for its shares	(iv)over not invited public to subscribe
(v) Managed by a board of directors	(v) Managed by partners themselves
(vi) Governed by articles and memorandum of association	(vi)Guided by the partners act/deed

Any 4 x 1 = 4mks

Effects of shift of the demand curve to the right.
- The price will increase.
- The quantity demanded will increase
- Equilibrium quantity shift to the right/increases
- The equilibrium price shift upwards/increases
- Equilibrium point shift upward to the right.
  Any 4 x 1 = 4mks
Reasons why bill boards are popular in product promotions.
- They are positioned at strategic positions where they can be accessed by many people.
- The advertising message is not heavily worded thus making it possible to be remembered easily.
- They convey a message for a long time.
- They are conspicuous hence attractive to the audience.
- They can convey a message to the illiterate because off use pictures.
  Any 4 x 1 = 4mks
Measures that a government may take to correct a balance of payment deficit in the Country
- Increasing to volume of export
- Decreasing volume of import
- Devaluation of a country’s currency.
- Diversification of exports
- Encouraging foreign investment into the country
- Restricting capital outflow.
- Deflation on of the economy
- Selling government investments abroad.
  Any 4 x 1 = 4mks
Benefits that may enjoyed by a Country that is experiencing over- population.
- Wide market for goods and services
- Better utilization of resources
- Creates a pool of resources
- Enhance creativity and innovation
- Stimulates investments
- Promotes labour mobility
  Any 4 x 1 = 4mks